Sunday, July 18, 2010

A Jobless Recovery for the Unskilled and Less Educated

For the last several months, the Obama Administration has been talking a lot about "a jobless economic recovery." The Administration points to statistics showing that the unemployment rate has dropped to about 9.5 percent, down from a peak of 10.1 percent last October, to justify its policies to stimulate the economy.

For the millions of Americans who are unemployed, underemployed, or have abandoned the job market out of frustration, however, the talk out of Washington about "a jobless economic recovery" is utter nonsense.

In particular, for the long-term unemployed, talk of a jobless recovery must sound like a cruel joke. Let's get real. The proportion of the work force that has been out of work for more than six months is an astonishing 4.4 percent.

The more than 46 percent of the unemployed out of work for more than 6 months is twice the previous post-war high set in 1983. Although the long-term unemployment rate was obviously higher during the Great Depression, the figure has never approached this level since the government started collecting data in 1948.

It should come as no surprise that the Great Recession has hit unskilled workers and workers of color the hardest. For example, not only are blacks more likely to have lost their job, those who are not laid off have been more likely to see their pay and hours cut. According to data from June, the black unemployment rate (15.4 percent) is nearly twice as high as the white unemployment rate (8.6 percent).

(That black people, drinking from the Obama elixir, remain upbeat about the economy and think that a recovery is around the corner, despite being hit the hardest by the economic downturn is a topic for a future post).

Because of the boom-bust cycles of capitalism, most economists predict – though it may take years – the U.S. economy will recover from the Great Recession.

Unfortunately, due to structural changes in the U.S. economy that began decades ago, for the millions of unskilled and less educated workers who have lost their jobs during the Great Recession, this economic recovery will likely be a jobless one.

It has been noted in both scholarly and popular literature, that by the early 1970s, the American capitalist system was undergoing profound structural changes. Most significantly, the decades-long trend of manufacturing industries moving out of central cities and into the suburbs or rural areas of the south was intensifying.

The economy was also shifting from goods-producing to service-producing industries. One consequence of this shift has been the increasing polarization of the labor market into low-wage and high-wage sectors.

Generally speaking, the service sector covers a wide range of jobs that provide services for individuals, businesses and government. People working in the service industries have jobs ranging from selling real estate and providing financial services to people working in a store or restaurant.

Workers toiling away in the low end of the service sector – i.e., workers with little training and limited skills – are often forced to scrape by on minimum wages from a part-time job, for example, at a restaurant. (It should be noted that the struggles of low-skilled workers are compounded by the fact that many of the jobs they hold do not provide adequate health insurance or retirement benefits.)

Jobs at the high end of the service sector (e.g., doctors, lawyers, university professors, accountants, bookkeepers, bank tellers) compared to jobs at the low end (e.g., cashiers, waitresses) require years of education, specialized training, or college credentials, and most importantly, pay much higher wages.

Workers in the low-end sector of the economy have been hit the hardest during the Great Recession.

As the U.S. capitalist system continues to evolve, one devastating effect of the Great Recession is that it has accelerated the disappearance of the sorts of jobs that low-skilled workers depend on to support themselves and their families.

An obvious reason for the disappearance of low-skilled jobs and the increasing immiseration of the poor is globalization. Because of the hyper-mobility of capital, there is decreased demand for less-skilled workers. Many corporations have chosen to move low-skilled jobs out the country – taking advantage of U.S. tax laws that reward relocating production facilities abroad, and a nonunionized workforce and lax environmental regulations in developing and underdeveloped countries.

As a result, America's less-skilled workers fortunate enough to have a job once the economy picks up must compete with workers from underdeveloped or developing nations, which drive down wages in the U.S.

Given the bifurcation of the U.S. economy into high-end and low-end sectors, we may no longer be able to expect an expanding economy or even near-full employment to raise people out of poverty. For today's less-skilled workers toiling away in low-end service sector jobs, even full-time employment does not guarantee an escape from poverty. The implications of this are frightening.

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